Why Vermont abandoned its single-payer health-care plan

Advocates saw Vermont as the ideal laboratory for hatching a single payer system that might even serve as a role model for other states. But the price tag – $2.6 billion in a state with revenues totaling about $2 billion a year – was out of reach.

By
Matthew Dickinson, Decoder contributor /
December 24, 2014

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Democrat incumbent Vermont Gov. Peter Shumlin calls it a night without declaring victory on Tuesday, Nov. 4, 2014, in Burlington, Vt. The newly elected legislature will decide the race by secret ballot in early January.

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Back in 2010, as many of you may know, Peter Shumlin narrowly won election as Vermont governor in part on a promise to implement a single-payer health-coverage system run by the state. Although the term “single payer” can encompass a range of plans, the essential idea is that the state would institute a system of public financing to pay for universal health-care coverage. In May 2011, the Vermont legislature committed itself to implementing such as system when it passed, and Governor Shumlin signed into law Act 48, which laid out the basic principles underlying a single-payer plan.

Advocates saw Vermont as the ideal laboratory for hatching a single payer system that might even serve as a role model for other states. As they often pointed out, Vermont had a strong progressive record of “firsts” – the first state to mandate public financing for universal education in its constitution, the first to outlaw slavery in its constitution, the first to introduce civil unions for same-sex couples, and even the first to legislate in favor of gay marriages (as opposed to getting there through court order.) Could a single-payer health system be the next first? In a piece she wrote last April on Vermont’s single-payer proposal, the Vox’s Sarah Kliff quoted Shumlin saying, “If Vermont gets single-payer health care right, which I believe we will, other states will follow. If we screw it up, it will set back this effort for a long time. So I know we have a tremendous amount of responsibility, not only to Vermonters.”

But then came the hard part: figuring out how to raise the estimated $1.6-$2 billion needed to get the plan up and running by the 2017 target date. After Shumlin missed a 2013 deadline for revealing exactly how the state planned to finance the reform, criticism mounted that the costs were likely to be much higher than initial estimates suggested. In the 2014 gubernatorial campaign, long-shot political novice Scott Milne, Shumlin’s Republican rival, hammered away at the incumbent governor on this issue, repeatedly arguing that Shumlin knew that single payer “was dead." In an interview on Nov. 1, Milne reportedly said, “During the campaign I said that single-payer is dead – I’m telling you that now, and Peter Shumlin’s going to wait until after the election.” And, in an outcome that surprised almost everyone, Milne came within a bit more than 2,000 votes in unseating the incumbent. Indeed, analysts suggested that without the presence of the Libertarian candidate Dan Feliciano, who earned more than 8,000 votes, Milne would have become Vermont’s next governor. But the race is not over. Under Vermont law, because no gubernatorial candidate got more than 50 percent of the vote, the newly elected legislature will decide the race by secret ballot in early January. In a move that has surprised even some of his strongest supporters, Milne has announced that he is not willing to concede the race to Shumlin.

It was against this backdrop that, last Wednesday, in a news conference in the Statehouse, Shumlin dropped a bombshell ;by admitting, in effect, that the state had “screwed up.” He announced that the state would forego, at least for now, any effort to implement a single-payer system.

The reason, Shumlin acknowledged, was precisely what critics had long maintained: The plan was fiscally untenable. According to the governor, the most recent studies indicate a single-payer system would require an 11.5% payroll tax on businesses and a sliding income tax that would tax some wage earners up to 9.5% on top of the existing state income tax. Moreover, some small business owners who do not now provide health coverage would take a double whammy by getting hit with both income and payroll tax hikes. All told the price tag for a single-payer system was now estimated to be $2.6 billion in a state with revenues totaling about $2 billion a year.

Not surprisingly, advocates for a single health care plan felt betrayed by Shumlin’s reversal, and vowed to push forward with the plan through legislative action. Opponents, meanwhile, voiced a loud “We told you so.” As with health care reform nationally, polls suggested the public was divided on the Vermont plan, with approval rates varying depending on how the poll question was worded. The immediate issue, of course, is what impact, if any, Shumlin’s announcement will have on the legislative vote on January 8 to determine the next governor. I have no doubt that Milne is right – Shumlin certainly knew for weeks, if not months, that the numbers would not add up but like any smart politician he withheld the bad news until after the election. By announcing the death of single payer now, however, he may have removed a political weight from the shoulders of many Democratic legislators who probably did not relish having to vote on a single-payer financing system in the coming legislative session. Some are even lauding Shumlin for his political “courage” in making the announcement now. This, in my view, is a dubious claim – real courage would have meant making the announcement before the November election. However, I doubt many legislators are going to vote against Shumlin for governor on the basis of this one announcement, and it might even shore up support among some who are relieved that the issue has been removed, at least for now. We’ll know soon enough.

As for the broader lessons from this ill-fated effort, supporters and skeptics alike are left wondering if a single-payer system lacked political support in a liberal-leaning deep-blue state like Vermont, what chance does it have in any US state? However, I think this misses the real lesson of the Vermont experience. One of the reasons why the Vermont plan proved fiscally unworkable is that the latest estimates showed that in part because of Obamacare, the state would get $150 million less in federal health care aid than anticipated earlier, as well as $150 million less in Medicaid assistance. Other difficulties included how to pay for coverage for non-residents who were employed in Vermont. These problems point to the difficulty of enacting a state-based single-payer plan in a health care system that is inextricably bound up with a national economy and which is struggling to implement a national health care reform plan. As it turns out, many of the factors cited for why a single payer system might work in Vermont – its small population and progressive leanings – mattered a lot less than supporters understood Indeed, Vermont’s small economy might make it more susceptible to national economic forces. The plain fact is that it is going to be difficult for any state, no matter what its ideological leanings and fiscal health, to move ahead by itself with comprehensive health care reform. In the end, health care is primarily a national issue and if single-payer is the way to go, it is likely going to have to happen at the national level. That, I think, is the lesson to take from the Vermont experience.

Matthew Dickinson publishes his Presidential Power blog at http://sites.middlebury.edu/presidentialpower/.